SCOTTSDALE, Ariz.–(BUSINESS WIRE)–Universal Electronics Inc. (UEI), (NASDAQ: UEIC), the worldwide leader
in sensing and control technologies for the smart home, reported
financial results for the three and twelve months ended December 31,
2018.

Paul Arling, UEI’s chairman and CEO, stated, “The connected home has
arrived. In 2018, we achieved our goal of generating over $130 million
in home automation net sales and gained traction in our advanced,
intuitive 2-way home entertainment systems. Our corporate and
manufacturing initiatives started in the second half of 2018 to address
macro challenges and free resources for strategic investments, all of
which will position UEI well for 2019 and beyond. While we have acted
quickly to respond to the punitive tariffs implemented by our government
during 2018 by broadening our sources of supply to locations outside
China, this transition delayed shipments and net sales fell short of our
expectations in the fourth quarter. But, with our solid gross margins
and increased operational efficiency, we met our fourth quarter bottom
line guidance. Meanwhile, we continue to make progress to improve supply
and expect to continue seeing positive results in the coming months. In
addition, we are excited about the rising demand for our advanced
products in both home entertainment and home automation.

“AV control is expanding into other applications like home automation.
To capture market, in collaboration with Microsoft, we unveiled Nevo®
Butler, an end-to-end voice-enabled smart home hub that unifies
entertainment control and home automation experience. Offering a
white-label digital assistant providing interoperability across
fragmented ecosystem, Nevo Butler enables service providers and consumer
electronics brands to bring voice-enabled services to their customers
while remaining in control of the consumer relationship. We believe our
efforts to enhance our competitive position, enter new markets, attract
new customers, and continually improve account service will result in
consistent and profitable growth.”

Financial Results for the Three Months Ended
December 31: 2018 Compared to 2017

GAAP operating income was $2.6 million, compared to an operating loss
of $0.5 million; Adjusted Non-GAAP operating income was $13.7 million,
compared to $10.4 million.

GAAP net loss was $11.1 million, or $0.80 per diluted share, compared
to a GAAP net loss of $16.9 million or $1.19 per diluted share;
Adjusted Non-GAAP net income was $9.7 million, or $0.70 per diluted
share, compared to $8.7 million, or $0.60 per diluted share.

At December 31, 2018, cash and cash equivalents were $53.2 million.

Financial Results for the Twelve Months Ended
December 31: 2018 Compared to 2017

GAAP net income was $11.9 million, or $0.85 per diluted share,
compared to a GAAP net loss of $10.3 million or $0.72 per diluted
share; Adjusted Non-GAAP net income was $33.6 million, or $2.39 per
diluted share, compared to $41.1 million, or $2.81 per diluted share.

Bryan Hackworth, UEI’s CFO, stated: “To keep pace with the growing
demand for our products and services, our investment in innovation and
efforts to mitigate the effect from additional punitive US tariffs, we
are enacting strategic initiatives aimed at streamlining our business,
creating organizational efficiencies, controlling our costs, and
optimizing our operating footprint. By expanding our existing facility
in Mexico and adding capabilities in the Philippines, we are actively
upgrading our manufacturing footprint outside China. Although the
transition to advanced control technology is taking longer than
expected, new and existing customers are including significantly more
UEI technology in their next generation orders, commanding a higher
price per unit. We are confident that this, together with our continued
focus on growth through technology, innovation, and best in class
product quality and delivery, will result in continued growth and
profitability.”

Financial Outlook

For the first quarter of 2019, the company expects GAAP net sales to
range between $179 million and $187 million, compared to $164.7 million
in the first quarter of 2018. GAAP earnings per diluted share for the
first quarter of 2019 is expected to range from $0.10 to $0.20, compared
to GAAP net loss per diluted share of $0.04 in the first quarter of 2018.

For the first quarter of 2019, the company expects Adjusted Non-GAAP net
sales to range between $179 million and $187 million, compared to $170.6
million in the first quarter of 2018. Adjusted Non-GAAP earnings per
diluted share are expected to range from $0.70 to $0.80, compared to
Adjusted Non-GAAP earnings per diluted share of $0.62 in the first
quarter of 2018. The first quarter Adjusted Non-GAAP earnings per
diluted share estimate excludes $0.60 per share related to, among other
things, stock-based compensation, amortization of acquired intangibles,
changes in contingent consideration relating to acquisitions, effects of
foreign currency fluctuations, unabsorbed manufacturing overhead
resulting from factory underutilization, tariffs, restructuring costs
and the related tax impact of these adjustments. For a more detailed
explanation of Non-GAAP measures, please see the Use of Non-GAAP
Financial Metrics discussion and the Reconciliation of Adjusted Non-GAAP
Financial Results, each located elsewhere in this press release.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday,
February 21, 2019 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its fourth
quarter and full year 2018 earnings results, review recent activity and
answer questions. To access the call in the U.S. please dial
877-843-0414, and for international calls dial 315-625-3071
approximately 10 minutes prior to the start of the conference. The
conference ID is 5754839. The conference call will also be broadcast
live at www.uei.com
where it will be available for replay for one year. In addition, a
replay will be available via telephone for two business days beginning
two hours after the call. To listen to the replay, in the U.S. please
dial 855-859-2056, and internationally dial 404-537-3406. The access
code is 5754839.

Use of Non-GAAP Financial Metrics

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, UEI provides Adjusted Non-GAAP
information as additional information for its operating
results. References to Adjusted Non-GAAP information are to non-GAAP
financial measures. These measures are not required by, in accordance
with, or an alternative for, GAAP and may be different from non-GAAP
financial measures used by other companies. UEI’s management uses these
measures for reviewing the financial results of UEI, for budget planning
purposes, and for making operational and financial decisions and
believes that providing these non-GAAP financial measures to investors,
as a supplement to GAAP financial measures, helps investors evaluate
UEI’s core operating and financial performance and business trends
consistent with how management evaluates such performance and trends.
Additionally, management believes these measures facilitate comparisons
with the core operating and financial results and business trends of
competitors and other companies.

Certain elements of UEI’s results of operations are presented excluding
the impact of foreign currency exchange rate fluctuations (constant
currency). To present this information, current period results for
entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the average exchange rates in effect
during the corresponding period of the prior fiscal year, rather than
the average exchange rate in effect during the current fiscal year.
Therefore, the foreign currency impact is equal to current year results
in local currencies multiplied by the change in the average foreign
currency exchange rate between the current fiscal period and the
corresponding period of the prior fiscal year. Management believes that
presenting constant currency results of operations provides useful
information to investors because they provide transparency to underlying
performance by excluding the effect that foreign currency exchange rate
fluctuations have on period-to-period comparability.

Adjusted Non-GAAP net sales is defined as net sales excluding the impact
of stock-based compensation for performance-based warrants, the impact
of the adoption of Accounting Standards Codification 606, “Revenue from
Contracts with Customers” (“ASC 606”), the revenue impact of increased
U.S. tariffs on products manufactured in China and imported into the
U.S. and the impact of foreign currency exchange rate fluctuations.
Adjusted Non-GAAP gross profit is defined as gross profit excluding
stock-based compensation expense, depreciation expense related to the
increase in fixed assets from cost to fair market value resulting from
acquisitions, the effect of fair value adjustments to inventories
acquired in business combinations that sold through during the period,
amortization of intangibles acquired, excess manufacturing overhead and
factory transition costs, the impact of the adoption of ASC 606, the
impact of increased U.S. tariffs on products manufactured in China and
imported into the U.S. and costs of implementing countermeasures to
mitigate this impact, and the impact of foreign currency exchange rate
fluctuations. Adjusted Non-GAAP operating expenses are defined as
operating expenses excluding amortization of intangibles acquired,
stock-based compensation expense, employee related restructuring costs,
changes in contingent consideration related to acquisitions, the impact
of the adoption of ASC 606, costs incurred related to implementing
countermeasures to mitigate the impact of increased U.S. tariffs on
products manufactured in China and imported into the U.S., transaction
costs related to the sale of our Guangzhou factory, and the impact of
foreign currency exchange rate fluctuations. Adjusted Non-GAAP net
income is defined as net income excluding the aforementioned items,
foreign currency gains and losses, the net gain recognized on the sale
of the company’s Guangzhou factory, and the related tax effects of all
adjustments, as well as income tax expense representing the impact of
the U.S. Tax Cuts and Jobs Act, the effect of certain net deferred tax
asset adjustments and other nonrecurring income tax items. Adjusted
Non-GAAP diluted earnings per share is calculated using Adjusted
Non-GAAP net income. A reconciliation of these financial measures to the
most directly comparable GAAP financial measures is included at the end
of this press release.

About Universal Electronics

Universal Electronics Inc. is the worldwide leader in universal control
and sensing technologies for the smart home. For more information,
please visit www.uei.com/about.

Note on Forward-looking Statements

This press release and accompanying schedules contain “forward-looking
statements” within the meaning of federal securities laws, including net
sales, profit margin and earnings trends, estimates and assumptions; our
expectations about new product introductions; and similar statements
concerning anticipated future events and expectations that are not
historical facts. We caution you that these statements are not
guarantees of future performance and are subject to numerous risks and
uncertainties, including those we identify below and other risk factors
that we identify in our most recent annual report on Form 10-K and the
periodic reports filed thereafter. Risks that could affect
forward-looking statements in this press release include our ability to
anticipate the needs and wants of our customers and timely develop and
deliver products and technologies that will meet those needs and wants,
including our advanced control products, which include the continued
adoption of our recently announced Nevo Butler, nevo.ai digital
assistant, voice remote control, and intuitive 2-way home entertainment
technologies by existing and new customers; the continued incorporation
of our QuickSet technologies, including the Quickset Cloud, into
customers’ products as expected by management; the continued acceptance
and growth of our connected home products and technologies, including
security and control, temperature controllers and automation, and other
sensing technologies identified in this call; the timing of new product
rollout orders from our customers as anticipated by management; the
continued trend of the industry toward providing consumers with more
advanced technologies; the ability to successfully identify and enter
existing and new adjacent markets for our products and technologies; the
ability to attract and obtain new customers for our products and
technologies; management’s ability to manage its business to achieve its
net sales, margins, and earnings as guided, including management’s
ability to improve operating costs and efficiencies at acceptable levels
through cost containment efforts including moving our administrative,
operations, and manufacturing facilities to lower cost jurisdictions,
and effects that changes in laws, regulations and policies may have on
our business including the impact of trade regulations pertaining to
importation of our products and tariffs imposed upon them. Any of these
factors could cause actual results to differ materially from the
expectations we express or imply in this press release. We make these
forward-looking statements as of February 21, 2019. We undertake no
obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.